By Lawrence White
HONG KONG (Reuters) - Standard Chartered Chief Executive Peter Sands moved aggressively on Thursday to reverse the Asia-focused bank's fortunes by closing the bulk of its global equities business and axing 4,000 jobs in retail banking.
The lender said it was dismantling its stockbroking, equity research and equity listing desks worldwide, becoming one of the first global banks to get out of the equity capital markets business completely. The decision to close the loss-making division will lead to 200 job cuts, almost all in Asia.
In its retail banking division, Standard Chartered said it has announced 2,000 job cuts in the last three months, and plans to axe a further 2,000 this year. The cuts would represent about 5 percent of the bank's 86,000 employees.
The bank also announced the departure of Chief Risk Officer Richard Goulding and Jan Verplancke, chief information officer. It said both were retiring from the company and would stay until successors were appointed.
Sands, who turned 53 on Thursday and has been CEO for eight years, is coming under increasing pressure after a troubled two years, which abruptly halted a decade of record profits. Some investors said last year he should go, or the bank should at least lay out a clear succession plan.
Falling commodity prices and a slowdown in growth in many of its core emerging markets ate into Standard Chartered's earnings in 2014 and the bank has been hit by a surge in bad loans and rising regulatory costs. It also took a $175 million hit from a suspected commodities fraud in China..
Closing the equities businesses, which had revenues of about $100 million a year but were losing money, should save the bank $100 million a year from 2016.
That will add to a plan announced in October to cut $400 million in costs this year as Sands tries to reverse a slide in profits that has seen the bank's share price slump more than 40 percent over the past two years.
Bankers in Standard Chartered's equities division in Hong Kong arrived on Thursday to find they were locked out of the office. Some in Singapore were escorted from their workplaces.
"We came in this morning and were told the equity business was being shut down," a woman who identified herself as an ex-employee at the bank's offices in Singapore told Reuters, saying she had worked in research.
Standard Chartered's London shares were up 2.7 percent at 1311 GMT and its share rose 2.9 percent in Hong Kong as analysts welcomed signs that Sands is prepared to go further with his strategy overhaul.
Some analysts said more action may be needed to get the bank back on track, however.
"It's a logical step. But laying off staff is not enough to address the situation," said James Antos, a banking analyst at Mizuho Securities Asia in Hong Kong.
SENIOR CHANGES
London-based Standard Chartered issued three profit warnings last year and two months ago rating agency Standard & Poor's hit it with its first ever downgrade, adding to pressure on Sands for a more far-reaching overhaul.
The bank's biggest shareholders include Singapore state investor Temasek and asset managers Aberdeen Asset Management and BlackRock.
The exits of Goulding, 55, and Verplancke, 51, come on top of several senior departures last year. Goulding has been chief risk officer for eight years, based in London, and Verplancke has been chief information officer and head of technology and operations for a decade, based in Singapore.
The bank also said its corporate development and strategy functions will now report directly to Finance Director Andy Halford, rather than Sands. The bank said that had been the plan since Halford joined last year.
Retail banking, where Standard Chartered has more than 10 million customers in 34 countries, is a major target in its cost-cutting drive and the bank plans to focus more on its 1.6 million wealthy retail customers and 400,000 business clients.
Other global banks such as HSBC and Citigroup have been making cuts to their retail banking businesses in recent years, exiting inefficient markets and trying to focus more on online services rather than bricks-and-mortar branches.
Standard Chartered launched its equities business in November 2008 when it acquired brokerage Cazenove from JPMorgan. Its retreat follows moves by rivals including UBS and Barclays to cut back in areas of investment banking where they are unprofitable or lack size.
Standard Chartered had been hiring staff in the division, which involves underwriting stock offerings for companies, as recently as October. The decision to get out of the business comes despite a boom in equity underwriting in Asia that saw fees for the industry rise 74 percent in 2014.
Standard Chartered failed to rank among the top 10 banks globally for research or trading at the end of 2013, according to a survey by Greenwich Associates, and ranked 23rd last year in equity underwriting in Asia Pacific, according to Thomson Reuters data.
Equity capital markets head A Rajagopal, previously a banker with UBS India, had been leading that business since 2012, trying to build a presence in a division that was not traditionally a strong suit for Standard Chartered.
"Management is continuing with their rationalization process and no unprofitable sacred cows have been left untouched," said Christopher Wong, a senior investment manager at Aberdeen Asset Management Asia.
Standard Chartered said it would retain its equity derivatives business as well as its convertible bond and macro economic research units.
(Additional reporting by Saeed Azhar and Rujun Shen in Singapore, Denny Thomas and Alice Du in Hong Kong and Steve Slater in London; Editing by Lisa Jucca, Rachel Armstrong and David Clarke)
